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Licensing Act 2003 – implications for insolvency practitioners

The Licensing Act 2003 came into force in November 2005. Its effects were considerably wider than the much-publicised ‘24 hour drinking’ relaxation and, in particular, it makes specific provisions in relation to insolvency.

The Act applies not only to premises used for the sale of alcohol but also to those used for entertainment and late night food/drink sales. In the last recession, the relevant legislation was under an entirely different regime (the 1964 Licensing Act and Local Government legislation) where the alcohol licence was held by individuals and was not at risk when the company became insolvent. Equally, an entertainment licence could simply be transferred.

However, since November 2005, the new Act has been fully in force. Under this Act, the licence LAPSES immediately on insolvency and can only be resurrected if action is taken within the first seven days! Any unlawful trade in the interim period could result in a criminal prosecution.

The operating company (or a named individual) should have the benefit of a Premises Licence issued by the Licensing Authority for each and every premises where licensable activities are provided. So, for example, a late night food operation such as McDonalds or Burger King would need a separate premises licence for each of their restaurants for sales after 11pm or before 5am. However, in addition, where dealing with the sale of alcohol, you also need to consider the personal licence requirements (which are licences granted to individuals) and the identity and status of the Designated Premises Supervisor.

If a premises licence holder becomes insolvent (as defined in the Act), there is no effective premises licence. Therefore, the first thing to do if dealing with premises where licensable activities are involved is to check in whose name the premises licence is held. It may be that the licence is held in the name of the landlord in which case the insolvency of the tenant will have no effect on the premises licence or vice versa.

However, once a premises licence has lapsed there is no authority to provide licensable activities unless and until the licence is resurrected. Any person who provides, attempts to provide, or knowingly allows the provision of licensable activities before the licence is resurrected will be guilty of an offence.

The Act permits the resurrection of the licence by interim authority or transfer within 7 days from the point of insolvency. However, there is no mechanism to submit an application after the initial seven-day period and there is only one opportunity to submit either application during the relevant period. It is therefore essential to get the application right first time and to ensure that it is received before the deadline (the seven day period is absolute and doesn’t take into account weekends or bank holidays). There are various formalities which must be complied with to ensure that the application is accepted.

Furthermore, any application for interim authority is itself only valid for 2 months from the date of receipt. The licence lapses again after this period unless a transfer application is submitted within that time (this can be made in the name of the interim holder). If no transfer application is submitted within that time, again there is no mechanism to resurrect the licence.

In short, if you are dealing with licensed premises, it is essential to consider the requirements under the Licensing Act at the outset. Failure to do so could mean prosecution, breach of professional obligations and/ or additional expenditure to apply for another premises licence in its place.

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